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Miami Judge Rules Against Chinese Drywall Maker

After working hard to sell drywall in Florida, a Chinese exporter now must also fend off allegations of defective materials in Florida courts.

That was the conclusion of a Miami-Dade Circuit Court judge who ruled against Chinese drywall maker Taishan, which claimed it was too far removed from Florida's construction industry to be sued over defects.

The decision could open up a new front in the long-running battle by homeowners and contractors to collect damages over plasterboard they claim smells foul, eats up wiring and generally leaves a building uninhabitable.

The case hinged on the legal complexities brought on by global trade. Taishan argued it operated in China alone, and that liability for defects rests with companies further down the supply chain. Lennar, the home-building giant based in Miami-Dade that installed Taishan drywall in hundreds of homes, sued the Chinese company, demanding it take responsibility for the faulty product.

Judge Joseph Farina sided with Lennar, citing Taishan's efforts during Florida's housing boom to sell its product in the U.S. market. The company sent samples to U.S. dealers, hosted Florida construction executives for tours of Taishan's plants in China and customized some drywall materials to be imprinted with a Tampa phone number for one Florida distributor.

"Taishan actively courted the Florida market,'' Judge Farina wrote in a decision issued Friday. He also ruled that a company most directly involved in selling Taishan drywall was in fact an arm of Taishan itself. It was Farina's last ruling before retiring from the bench on Friday.

If upheld, the ruling would amount to a small victory in a much larger legal fight involving builders across the country and Chinese drywall manufacturers. Already, a Taishan competitor, Knauf Plasterboard Tianjin, has agreed to a minimum $200 million settlement over its drywall in U.S. homes -- a deal plaintiff lawyers say could eventually be worth $1 billion.

Taishan faces a federal class-action suit in New Orleans. Should the judge in that case reach the same conclusion as Farina, it would have national consequences.

"We expect this ruling will set a favorable precedent for other homebuilders and victims across the country," said Hilarie Bass, the Greenberg Traurig lawyer representing Lennar. .

In all, about 4,500 homes in Florida and other Gulf states are suspected of being contaminated with defective Chinese drywall, which contains high levels of sulfur that can cause corrosion on wiring and duct work.

Lennar has not said how much money it wants from Taishan, but the builder has set aside $82 million to cover warranty claims related to Chinese drywall complaints. In filings with the SEC, Lennar said about 1,000 of its homes built in 2006 and 2007 had defective Chinese drywall in them. Bass said only a portion of the Lennar drywall came from Taishan but that the Chinese company is believed to be responsible for about 60 percent of the suspect drywall installed in homes throughout the country.